Opposition PASOK Wins Greek Parliamentary Elections

C O N F I D E N T I A L ATHENS 001533

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E.O. 12958: DECL: 2019/10/06
TAGS: PREL PGOV ECON GR
SUBJECT: Opposition PASOK Wins Greek Parliamentary Elections

REF: ATHENS 1513

CLASSIFIED BY: Daniel V. Speckhard, Ambassador, STate, US Embassy
Athens; REASON: 1.4(B),(D)


1. (C) SUMMARY: In an unexpectedly strong victory in Greece's
October 4 Parliamentary elections, George Papandreou's Pan Hellenic
Socialist Union (PASOK) opposition party defeated incumbent Costas
Karamanlis' New Democracy Party by a spread of more than ten
percentage points.

-- Winning 44 percent of the vote and an expected 160 seats in the
300 seat parliament, PASOK swept into power in its best showing
since 1981 on a wave of voter dissatisfaction with the poor
performance and corruption scandals of the outgoing government.

-- Economic issues were dominant with Papandreou promising a $4.5
billion economic stimulus package, protection for workers, a more
progressive tax burden, and an emphasis on green development.

-- New Democracy was hampered by widespread disappointment in its
ability to institute fundamental reforms, tackle corruption, and
deal with the economic crisis.

-- Foreign policy played little role in the elections, although
Papandreou has emphasized improving bilateral relations with Turkey
and the importance of EU accession, without lowering the standards
for admission. He was criticized on occasion for his strong ties
to America, having been born and educated in the U.S., and for
calling into question the Russian sponsored Burgas-Alexandroupolis
pipeline.

-- Papandreou intends to move quickly in forming a cabinet this
week.

-- While his promises of economic stimulus played well in the
election, he will face a tougher audience in Brussels where Greece
is scheduled to present its economic strategy in late-October.
Greece's high debt, expected to be more than 103 percent of GDP in
2009, and deficit projected in the 8-10 percent range , has made it
one of the more vulnerable economies in the EU.

-- We expect that Papandreou will be an engaging partner with the
U.S., given his past experience as a foreign minister, and his
interest in global political issues. However, he will be
restrained by public attitudes and domestic politics in making any
dramatic moves to alter Greece's relations with Turkey and the
Republic of Macedonia. END SUMMARY



Time for Change

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2. (U) In a surprisingly strong finish, the Pan Hellenic
Socialist Union (PASOK) opposition party of George Papandreou
resoundingly defeated incumbent New Democracy Party of Costantinos
Karamanlis in Greece's October 4 parliamentary elections. Picking
up nearly 44 percent of the vote and a comfortable majority of 160
seats in the 300 seat parliament, PASOK was swept into power in its
best showing since 1981, on a wave of voter dissatisfaction with
the poor performance and corruption scandals of the outgoing
government.




3. (U) Running a campaign that many characterized as being "in
Obama's style," Papandreou focused on the middle, avoiding the
polarizing accusations and economic "tough-love" messages of
Karamanlis - who announced his resignation as ND party president
late Sunday night. Second rank parties such as the Greek Communist
Party (KKE) and Syriza on the left did relatively poorly, while the
far right LAOS party enjoyed modest gains, largely on the back of
dissatisfied ND voters. The "Eco-Greens" who fared well in European
Parliament elections in June, polled a respectable 2.56 percent,
but did not cross the 3 percent threshold to enter parliament.




4. (U) Papandreou is expected to name his cabinet as early as
today, Monday October 5, with the swearing in to be as early as
this Wednesday. Greek media report that the new government will
consist of both new and familiar faces; of sixteen cabinet members
as many as nine could be women, and five are expected to have
served in the previous PASOK government of Constantinos Simitis.
The pro forma necessary vote of confidence by parliament on the new
government's programmatic plans should take place within a week
following the swearing in of the government.



PASOK Economic Plan: Optimistic, but a Tough Sell in Brussels

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5. (U) Papandreou has promised economic relief for Greeks,
focusing on reinvigorated state efforts to redistribute the tax
burden, fight high prices, support small- and medium-sized
businesses, create jobs, and promote investment, especially of the
"green" sort. Papandreou within the first 100 days reportedly
plans to pass five bills to revive the economy with an
approximately $4.5 billion stimulus package. Skepticism abounds,
however, regarding PASOK's ability to achieve its ambitious
economic electoral platform; moreover, Brussels will likely dictate
some of the way forward.


6. (U) Among Papandreou's top economic priorities are drafting a
budget for FY 2010 by November, preparing a plan for the EU
explaining how he will rein-in public spending and get Greece's
fiscal house in order, and providing data to the European
Statistical Service for its end-of-year report (Note: with
implications for EU oversight of Greece under the excessive deficit
procedure for Eurozone countries). PASOK insiders have told us
previously that their early priority will be to seek an extension
of the EU deadline for bringing the deficit back under three
percent (ref). Greece's high debt, which is expected to be more
than 103 percent of GDP in 2009, makes the fiscal imbalances more
unstable and Brussels less tolerant. The markets will be watching
to see if Papandreou picks one of the younger technocrat economists
as finance minister, signaling a more pragmatic approach to the
economy.



Foreign Policy - Continuity, With A More Positive Atmosphere

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7. (C/NF) On Foreign policy, as reported reftel, we expect the
broad outlines of Greek foreign policy not to change. Papandreou
has signaled, however, that he wishes to turn the page in relations
with Greece's neighbors, and will work hard - personally - to make
that happen. Always nostalgic of his own days as Foreign Minister
in the Simitis government (1999-2004),Papandreou has told us he
will work to create a more positive atmosphere in Greece's
bilateral relations in the region. On Turkey, we expect him to
maintain the GoG's firm support for Ankara's EU accession, while
insisting that Turkey meet the full EU aquis. We will encourage
the new GoG to take early steps and offer some confidence
building measures of its own to improve the atmosphere in the
Aegean as a first step.




8. (C/NF) Papandreou has also signaled to us that he is ready to
work with us to support the Obama Administration tackle the
challenges facing our generation. He has told us, and many
visiting USG officials that he plans to use his "good relations,"
stemming largely from his previous work as FM and current
presidency of the Socialist International, with leaders in
Pakistan, Egypt and elsewhere in the Middle East, and Africa.




9. (C/NF) With regard to the Republic of Macedonia (RoM),
Papandreou's staff have told us they want to change the corrosive
dynamic which has characterized recent Greece-RoM relations. While
it is unlikely that the new GoG will be able to lean so far
forward as to refrain from blocking the start of RoM's EU accession
during the December European Council meeting, they will seek in
other ways to diffuse the effect of that move, by reinvigorating
Greece's support for the EU accession prospects of the Western
Balkans more broadly, and putting the "name issue" into a broader,
and thus less toxic, context.




10. (C/NF) We do not expect the new GoG to take an active role in
the Cyprus reunification discussions, however, as a fellow
socialist and chairman of the Socialist International, Papandreou
himself may have a better personal relationship with Christoufias.
Many political analysts have commented that during the short
campaign, Papandreou made a trip to Cyprus as an indication that he
will give more importance to this issue than the departing
government. We may be able to capitalize on this in the end stage
to help get a positive message out of both Athens and Nicosia on
the costs/benefits of the eventual deal.




11. (C) On Afghanistan, we have no indications that the new GoG
will backtrack on its predecessor's level of commitment. We
believe the new government will not revisit lifting of caveats that
had restricted the Greek engineering battalion in Kabul, though
equipment shortfalls are threatening the battalion's planned
deployment to Herat. On development assistance for Afghanistan and
Pakistan, we have heard that the new government will look into
additional funds - subject to addressing its dire fiscal situation.





12. (C) On the other hand, the new government wants to take a
more holistic approach to the migration crisis confronting Greece,
and we expect it to respond positively to arguments linking the
stabilization of conflict zones (including Afghanistan and
Pakistan) with easing its own migration challenges. Many of our
contacts in the NGO community here believe that a PASOK government
will provide NGOs more funding and focus more on human rights and
social issues, such as supporting victims of human trafficking,
integrating migrants into Greek society, Roma education, increased
freedoms for minority religious groups, and reforms to Greece's
much-criticized asylum process.




13. (C) We expect the new government to continue its
predecessor's pattern of good, but quiet, counterterrorism
cooperation with us. The December 2008 riots and the resurgence in
domestic terrorism contributed to a greater public sense of
insecurity, which played a large part in the loss of confidence in
ND. PASOK - which was in power when members of the November 17
terrorist organization were arrested in 2002 - knows that security
will be one of the criteria on which voters will judge its
performance in power.



COMMENT on Political Landscape:

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14. (C) Comment: With the pickup of a large number of undecided
voters in the middle of the spectrum and the relatively large
percentage of ND voters who did not bother to show up at the polls
or who drifted to far-right LAOS, Papandreou won the battle for the
middle. By maintaining a moderate tone throughout the campaign,
Papandreou managed to avoid falling into the trap of ND attempts to
polarize the debate and rally its party base. Winning
approximately 45 percent of first time voters -- in echoes of the
Obama campaign, as reported in some media here -- bodes well for
PASOK's immediate electoral future, although Papandreou will have
to make good on his campaign promises to maintain their support.
In his acceptance speech Papandreou asked not for voters' tolerance
but for their participation. END COMMENT.
Speckhard